Gas use set to drop by 4% in 2020: BNEF

Potential magnitude of resource and landed cost of hydrogen in Germany, 2050

Global gas use is set to drop by around 4 percent in 2020 against a growth of more than 2 percent in 2019.

The Covid-19 pandemic reduced energy consumption. The resulting low gas prices, as well as clean air and climate policies, will promote switching to gas from other more polluting energy sources, such as oil and coal, according to the Global Gas Report 2020, published today by the International Gas Union (IGU) and research company BloombergNEF (BNEF).

Medium-term growth will come from increasing cost-competitiveness and increased global access to gas. A particular growth opportunity exists in liquefied natural gas.

LNG imports reached 482 billion cubic meters in 2019, up 13 percent from 2018. LNG imports is expected to fall by around 4.2 percent in 2020 and will rebound quickly to previous levels as soon as 2021.

Ample natural gas resources exist to support demand growth, but greater gas infrastructure development is needed to support growth in the medium term. India is planning to almost double the length of its gas transmission grid, while China will grow its gas network about 60 percent by 2025.

Ashish Sethia, global head of commodities at BNEF, commented: “We have seen coal-to-gas switching in Europe, and clean air policies in major growth markets such as India and China will drive more gas adoption in the next few years.”

Joe Kang, president of IGU, said: “Gas is a clean, accessible and flexible substitute to more polluting energy sources, and supporting greater fuel switching from coal and oil to gas in the immediate term, while ensuring infrastructure is ready to accommodate progressively greater scale of clean gas technologies in the coming decade, is the way to secure a sustainable and prosperous future.”

Clean hydrogen could abate up to 37 percent of energy-related greenhouse gas emissions, according to BNEF estimates.

This would require a range of steps, including emissions pricing linked to clear, Paris-aligned long-term climate targets; harmonized standards governing hydrogen use; coordinated strategies regarding regional and global infrastructure roll-out, and the deployment of hydrogen-ready equipment, such as pipelines, gas turbines and end-use appliances.

The development of an international hydrogen market could accelerate adoption. Germany, which is pursuing rapid development in hydrogen, could procure cost-competitive hydrogen (at about $1/kg) in 2050 from a variety of sources, including via electrolysis from its own domestic renewable power, or via pipeline imports from North Africa or Southern Europe.

Snam CEO Marco Alvera said: “The hydrogen market is on the verge of a revolution. The goal is to bring down the cost of green hydrogen until it becomes competitive with fossil fuels in many applications in the next five years.”

A smart way to scale up hydrogen production is blending it with natural gas in existing gas pipelines, something Snam has been testing for two years.